Driving Value Through Category Management

1

Pre - 2015

Tasnee Procurement has evolved over a period of time to reach to

excellence and sustainability

2

2015

▪ Tactical Procurement▪ Contract administration▪ Price based supplier

selection

▪ Category management▪ Spend visibility▪ Contract management▪ Buying consortia▪ Track & trace tool▪ Org. effectiveness

- Business Partner- Center of

Excellence (CoE)- Sourcing

committees

▪ Contract life cycle management through SAP Ariba

▪ Supplier management▪ Reverse auctions▪ Local content▪ Value based supplier selection▪ Supply risk management (BCP)▪ Digitalization

2018 & beyond

▪ Diagnosed & baselined current processes & spend

▪ Designed target state processes

▪ Analyzed current contracts

▪ Profiled current and potential suppliers

▪ Identified quick wins

▪ Further engaged users and suppliers to develop and refine improvement ideas

▪ Created category based organizational structure across levels to maximize value creation & sustainability

▪ Redefined & streamlined roles and responsibilities

▪ Prioritized categories based on their potential and ease of implementation

▪ Built category strategies

▪ Developed & introduced BUYER approach

▪ Developed savings tracking methodology

▪ Introduced procurement levers (should cost, demand mgmt. etc.)

▪ Implemented quick wins

3

Diagnosis Prioritization &Alignment

Implementation Change Management

▪ Developed training programs

▪ Report realized savings (P&L)

▪ Monitored execution performance and ensure optimization

▪ Corrective actions in case of under-performance

▪ Updated policy & procedures

We followed a structured project management methodology for

Category Management implementation

We analyzed ~200k PO lines, from multiple sources and developed

spend visibility through Spend Cube

4

Cristal KSA

Tasnee spend

baseline

categorization

(L1 to L4)

Downstream3

Cristal International

At region level detail

TPC

At BU level detail

At BU level detail

Spend baseline

▪ Raw spend data collected across different systems, +10

different parties and 5 continents

▪ Sanity checks conducted rigorously and findings

compared with information in different sources

▪ Spend baseline with different components determined

Aggregation and categorization

▪ Data aggregation/standardization conducted (>200k line

items standardized)

▪ Standardized and aggregated data categorized from L1 to

L4 levels

Finance Dept’s1 Procurement Dept’s2

Tasnee 2014 spend baseline

Procurement spend

Clean-up and stress test of raw data

Additional raw material and chemicals spend

Other costs

Category execution strategies were prioritized based on annual spend

& ease of implementation

5

3.0

1,755

2.90.4 2.5

110

1,765

2.20.7 3.20.6 4.50.3 3.42.0 3.32.62.10.8 2.30.5 3.12.82.72.4

1,760

4.2

35

30

4.03.93.8

10

4.8

60

4.43.73.63.5 4.74.3

15

4.1 5.0

0

4.6

5

25

20

4.9

75

50

40

90

80

65

45

85

55

105

70

0.9

Road

Processing Equipment And Spares

Additives

Filtration

Power Transmission & Bearing (Ptb)

Hvac

Electronics And InstrumentationWater Treatment Chemicals

Construction And Installation

Resins

Pipes, Valves & Fittings

Industrial And Calibration Gases

Hardware & Fasteners

Material Handling Supplies

Process Chemicals

Electrical

Industrial Supplies

Building Supplies

Engineering And Design Services

Pumps & Pump Kits

Material Handling

Laboratory Equipment & Supplies

Annual spend2014 SAR Mn

Packaging Supplies

Water

3Rd Party Logistics (3Pl)

Fabrication

Warehousing

Waste Management

Maintenance Services

Equipment Rental

Hr Services

Other Professional Services

Equipment Maintenance And Repair

Office Supplies

Pallets

It Software

Building Repair And Construction

Safety Supplies

Refractories

Consulting

Facility services

Compensation Or Benefits

It Services

Freight Forwarding

Customs Brokerage Service

It Hardware

Low Medium High

Wave 4-5, long tailWave 2-3Pilot – Wave 1

Ease of capture1

Re-designed our organization around Category Management for

maximum operational performance & value creation

Business Partner

– Ti

Business Partner

– Petchem

Business Partner

– DS

Projects

Industrial

Business

APAC

South America

North America

Europe

Analysis and

KPIs

Policies and

Procedures

Supplier

Performance

Management

Central

Procurement

KSA

Procurement

Raw materials &

Packaging

Services &

Projects

International

Procurement

Center of

Excellence

Transactions

Class C

Class A

Class B

MRO +

Consumables

Chemical

Permit

Custom

Clearance

Freight

forwarding

Exemptions

Inbound logistics

6

▪ Implement and Track contract progress, compliance, and financial results

▪ Take corrective actions in case of under-performance

▪ Manage supplier performance

▪ Identify future value improvement potential

▪ Finalize implementation plans

▪ Design and float RFP / Conduct sourcing event

▪ Execute process improvement ideas

▪ Negotiate with current and potential suppliers

▪ Finalize contract with legal

▪ Develop KPI metrics and build into contracts

▪ Sign contract

▪ Select focus areas based on preliminary hypotheses

▪ Develop work-plans

▪ Develop and quantify improvement ideas, using analytics and creativity methods

▪ Further engage users and conduct idea generation workshop

▪ Evaluate and prioritize improvement ideas

– Assess opportunities and risks

– Quantify financial impact

▪ Develop new category/supplier strategy

▪ Finalize scope and specifications

▪ Develop implementation plans to execute category strategy

▪ Drive approval process

▪ Build baseline– Build spend database – Understand future

demand (volume and needs)

– Analyze current contracts

– Identify key stakeholders

– Develop cost break downs

– Assess TCO

▪ Understand supply markets

– Understand market dynamics

– Profile current and potential suppliers

▪ Engage legal team

▪ Define objectives and preliminary scope of work

▪ Define governance structure

▪ Identify cross-functional team and hold kickoff

▪ Agree on timeline and next steps

▪ Assign category board

Execute ReviewYield measures

Understand

Build Baseline

Create category strategy

Managecontracts

Manage contracts & category

performance

Understandsupply

markets

Implement strategy internally

Negotiate with suppliers

Set up team &governance

Selectfocusareas

Identify potential and develop ideas

Syndicate and refine measures

Engagestake-

holders

Build

BUYER approach has helped us in realizing the value of Category

Management

7

Realizing a measure takes 5-stage¹ approval process to ensure

sustainability and P&L reflection

Implement-ation Level

▪ Initiatives identified and described, incl. rough estimation of run-rate EBIT potential

▪ Measure fully evaluated and ready for approval

▪ Measureendorsed by all relevant stakeholders

▪ Measure operationally implementedand successconfirmed by line management

▪ Financial realization of impactagainst baseline of 2014 confirmed by finance

▪ PMO Member

▪ Line responsible

▪ Or TEP Steering Committee

▪ Business Owner

▪ CFO▪ Workstream Leader

Description

Responsible

IL5

Target

IL2IL1 IL3 IL4

1 Improvement value on the diagnostic baseline year of 2014

Measure

Identified

Measure

Evaluated

Measure

Approved

Measure

Implemented1

Measure

Realized

IL6

Measure Banked

▪ Financial realization of impactin actual P&L –Current margin and volume confirmed by finance

8

The value realization roadmap had 3 horizons towards sustainable

operational excellence and impact

Timeline

Key

activities

Target

Impact

(IL4)

Create basic transparency,

design the journey,

prioritize quick wins and pilot

first categories

Implementation

and impact capturing while

upgrading procurement

processes

Sustainability and

continuous improvement

~3 months ~ 11-12 months

▪ Implement Pilot Wave of

category management

▪ Design target state processes

and KPIs

▪ Implement quick wins

▪ Implement Wave 1 and 2 of

category management

▪ Harmonize processes across

entities

▪ Commence system

integration

25-50 155-310 30-40

▪ Complete implementation of

processes / remaining Waves

of category management

▪ Monitor performance and

ensure optimization

25-50 180-360 ~210-~400

Per Wave

Cumulative

3 months and beyond

9

Appendix

10

We diagnosed multiple high spend categories & came up with our

recommendations to increase savings & sustainability

Spares Inventory

Optimization

▪ ~ 15% potential duplicates identified▪ Multiple items are kept in same bin location▪ Identified opportunities to reduce inventory carrying

cost by ~ 15-20 % YoY▪ Opportunity to reduce max. stock level by optimizing

safety stock, re-order point & delivery time by 10-12%▪ Shelf life items are kept outside temperature

controlled area▪ Non-moving stock value and count is growing YoY

What we foundWorkstream

▪ Conduct data cleansing & eliminate duplicates▪ Link cleansed data with eBOM▪ Optimize data governance solution for keeping the data

clean and green▪ Improve warehouse utilization and decrease cost of

operations▪ Inventory Strategy optimization for slow moving, non-

moving items against criticality A and B

What do we need to do

Logistics and

Freight

Raw Material and

Packaging Cost

Optimization

Contracts

▪ Improper utilization of contracts▪ Price optimization opportunity▪ Manpower qualification issues▪ Planning issues

▪ Reduce price through supplier negotiations, buy or rent option

▪ Optimize and ensure proper contract utilization▪ Work with end users to create manpower

qualification criteria▪ Optimization through proper planning

▪ Successful test trials were conducted for FFS bags in HDPE, however they were un-successful in LDPE

▪ Supplier not aligned with the trial process for FFS bags

▪ Carbon Black MB is under study with technical team with 80% completion

▪ Standardize & optimize packaging specifications▪ Conduct trails & identify alternate suppliers for

identified RM▪ Keep Carbon Black MB project with technical team

▪ Baselining gaps▪ No economy of scale due to fragmented Spend▪ Dynamic Fluctuating Market/Prices▪ Container/Equipment shortage

▪ Develop total Cost of Ownership (TCO) approach▪ Scope consolidation▪ Identify cost Levers & contract compliance▪ Understand capability matrix of service providers

11

Total

Spares InventoryOptimization

Logistics & Freight

RM & Packaging

Cost Optimization

Contracts

450

906

269

123

64

40 - 60+

25 - 30

10 - 15

5 - 10

80 – 110 +

Minimize inventory without compromising on reliability & eliminate obsolete stocks, standardization & increase spares availability based on asset integrity

Minimize cost & supply risk for logistics through benchmarking & identifying new solution and alternate suppliers

Develop sustainable raw material supply & reduce risk through reviewing TCO for RM materials & identify cost reduction opportunities

Optimize and ensure proper utilization by reviewing ARCs and evaluating the effectiveness and utilization of current contracts

Workstream Description Spend Savings

A detailed spend analysis was conducted on selected categories

for implementation prioritization

Category Expected Saving¹

13

12

Progress Next Steps

Lo

gis

tic

s a

nd

Fre

igh

t

Ocean Freight

Integrated

Supply Chain

Inbound FFD

Total

1

2

28

Spend¹

Strategic Storage

Movement

121

127

13

9

270

Current Status

The implementation progress was monitored in close co-ordination

with category management team (1/4)

1. In SAR M

▪ ITP signed with all shipping

lines

▪ 2 years contract renewal

under Progress. Awaited

FFD’s confirmation

▪ Contract signed with all FFD

except JAS

▪ Obtaining management

approval on the award

recommendation

• Savings under Monitoring and

reporting on Monthly basis

• Contract renewal - Executive

Summary preparation is in

progress

• Savings to be monitored and

reported on Monthly/quarterly

basis

• Contract execution and

monitoring saving

12

The implementation progress was monitored in close co-ordination

with category management team (2/4)

Category Expected Saving¹

7

1

Progress Next Steps

RM

& P

ac

ka

gin

g C

os

t O

pti

miz

ati

on

Lower thickness

for FFs bags

Total

1

1.3

12.6

Spend¹

72

6

123

Current Status

▪ Samples have been

approved & now we are

awaiting customer

feedback

▪ Under feasibility study

▪ Prepare for the plant trail

and procure trial quantity

▪ New Preblen-A recipe is

approved

▪ Successfully conducted

trial for Carbon Black with

small quantities

▪ Initiate the bidding

process for the lower

thickness and glue less

FFS bags

▪ Share the findings with

the broader team

▪ Conduct plant trails for

LDPE

▪ Initiate the bidding

process

▪ Re examine the

process with bulk

quantities

Glue-less FFs

bags

PAL²

Concentrated Peroxides in LDPE

New Preblen-A recipe in HDPE

Carbon Black in Bulk – HDPE

1

1.3

6

5

34

1. In SAR M

2. PAL (Propionaldehyde), is a byproduct from oxidation of catalyst. Idea here is to examine the possibility of making commercial grade PAL to be used for LDPE plant 13

The implementation progress was monitored in close co-ordination

with category management team (3/4)

Category Expected Saving¹

1

1

Progress Next Steps

Co

ntr

ac

ts

Fabrication

Total

1

1

7

Spend¹

22

16

5

4

64

Current Status

▪ Obtained welding machine &

crew prices from contractors

▪ New rates were received and

compared for manpower

services

▪ Signed NDAs with third party

crane contractors

▪ Evaluated the manpower

utilization in HVAC category

▪ Negotiated the prices with

current contractors & invited 3rd

party contractor to explore

other methods of Hydrojeting

to achieve cost savings

▪ Obtained most purchased

MRO items list from contractor

and shared with MRO team

• Compare buy versus hire

scenarios in welding machines

• Award Manpower contract to 3

contractors. Potential savings is

obtained if only lowest bidder is

awarded

• Conduct third party site survey for

Crane usage optimization

• Negotiate with contractor and end

user for 8hr. daily usage v/s

existing 10 hrs. usage

• Waiting for third party proposal for

Hydrojeting services for

optimization / potential cost

savings

• Awaiting MRO recommendations

for the most shared item list for

street buying

Manpower

Crane

HVAC

Hydro jetting &

Hydrokinetic

Street Buying

13

4

2

1

1. In SAR M 14

Category Expected Saving¹ Progress Next StepsSpend¹ Current Status

Sp

are

s In

ve

nto

ry O

pti

miz

ati

on

• Assessment of project is

completed (Phase 1)

• Consultant submitted the

technical and commercial

proposal for review

• Phase 2, technical &

commercial evaluated &

finalized

• Negotiate further

discount

• Alignment and

approval from

management on

Phase 2

execution

The implementation progress was monitored in close co-ordination

with category management team (4/4)

~ 45

1. In SAR M

Total Inventory

Value

Total Yearly

Spend

> 500

~ 200

15

Thank You

16